Probe proves effective against antibiotic smuggling scheme

FDA Consumer, Jan-Feb, 1998 by John Henkel

A scheme to make money by

smuggling counterfeit antibiotics into the

United States from China backfired on a

New Jersey-based company and four

of its principals and key employees

when they were fined sums totaling

more than $1 million. They also were

given prison sentences or probation.

An FDA investigation begun in 1990

revealed that the company's illegal

activities cost end-user companies more

than $1.7 million in product losses.

Judge Joseph E. Stevens Jr., of the

U.S. District Court for the Western

District of Missouri, imposed the most

recent fines last April. He ordered the

company, Flavine International Inc.,

Closter, N.J., to pay $925,000; its

owner, Gerd Weithase, $75,000; and

vice president, Wolf Vogel, $10,000. He

also sentenced Weithase to two years in

prison and Vogel to home detention for

six months and gave both probations of

as much as three years.

The men were part of a scheme in

which Flavine bought bulk amounts of a

veterinary antibiotic ingredient,

oxytetracycline (OTC) base, and the human

antibiotic gentamicin sulfate from

unapproved sources in China for substantially

less than the price of legitimate

products. The company then resold them

to U.S. drug companies at inflated rates.

Besides constituting economic fraud,

the scheme posed a risk to food animals

and humans because these counterfeit

drugs are of unknown quality and potency.

The case began in May 1990, when an

industry source contacted FDA's Omaha,

Neb., resident post with information

linking Flavine to the counterfeit OTC

base. The source stated that Flavine had

imported about 310 metric tons of OTC

base from China in 1989. But the

company's legitimate Chinese manufacturer,

Long March Pharmaceutical Plant,

which is approved by FDA, had made

only 100 metric tons of the chemical

that year. Thus, officials say, at least part

of the shipments likely came from

unknown, unapproved sources.

In June 1991, FDA investigator

Michael Spangenberg visited the Long

March plant in China and took pictures

of legitimate bulk OTC containers. After

he returned to the United States, he

inspected SmithKline Beecham Animal

Health, in Omaha and determined that

the bulk materials there were counterfeit

because the containers were different

from those in China.

Over the next three years, FDA and

U.S. Customs officials seized suspected

counterfeit materials from five end users

and warehouses. The material came

from Flavine and other possible suppliers.

Among the seizure sites were the

Port of Baltimore; Fermenta Animal

Health, Elwood, Kan.; and Sanofi

Animal Health, Le Sueu, Minn. Much of

the material was later destroyed after

being proven counterfeit.

In May 1993, after establishing

probable criminal activity, special agents

from FDA's Office of Criminal Investigations

(OCI) and the U.S. Customs

Service executed a search warrant at

Flavine's New Jersey headquarters. At

the same time, agents executed searches

at the company's Kansas City, Mo.,

offices and at the residence of company

vice president Ira "Rip" Siegel in

Parkville, Mo.

In reviewing records seized during the

search, OCI and Customs agents learned

that Flavine was using a North Carolina

company to repackage some of the

20-kilogram drums of counterfeit OTC base

into 25-kg drums. The agents concluded

that the company used this maneuver to

hide its sale of counterfeit products by

repackaging materials to look like they

were from Long March, the legitimate

Chinese manufacturer, which packs its

OTC materials only in 25-kg drums.

Between December 1993 and February

1994, OCI also analyzed import

information, determining that out of all the

company's OTC base shipments, almost

half--277,325 kg--of the shipments

came from Chinese sources other than

the legitimate supplier and were likely

counterfeit.

These suspicions were backed up in

May 1994, during an OCI and Customs

interview with Long March official

Dejun Meng. He confirmed that numerous

shipments of OTC base, sold by Flavine

under the Long March name, were

not made by Long March. He outlined

for agents several ways they could

distinguish Long March materials from

counterfeit by examining the products'

certificates of analysis.

In December 1994, OCI, Customs,

and the Justice Department's Office of

Consumer Litigation interviewed former

Flavine employee W. Mark Paradise. He

verified that numerous shipments of

OTC base had not been produced by

Long March but were sold in the United

States as such.

Agents also reviewed Flavine's

shipment record of other bulk drugs it

bought from overseas. They found that

Flavine had counterfeited several other

drugs, including gentamicin sulfate, an

antibiotic used to treat bacterial

infections, such as those caused by

Streptococcus pneumoniae, in humans

and animals. Long March also makes

gentamicin sulfate, and, again, Meng

verified for agents that some of the bulk

gentamicin sulfate sold by Flavine under

the Long March name was not made by

his company.

On Jan. 24, 1995, a federal grand jury

returned an 11-count indictment charging

Flavine International, Weithase, and

several of his associates with conspiracy,

smuggling, misbranding, and other

federal drug violations.